Accounting for the effect of solvent on the strength of molecular interactions has been a long-standing problem for molecular calculations in general and for structure-based drug design in particular. Here, we explore the generalized-Born (GB/SA) model of solvation to calculate ligand-receptor binding energies. The GB/SA approach allows the estimation of electrostatic, van der Waals, and hydrophobic contributions to the free energy of binding. The GB/SA formulation provides a good balance between computational speed and accuracy in these calculations. We have derived a formula to estimate the binding free energy. We have also developed a procedure to penalize any unoccupied embedded space that might form between the ligand and the receptor during docking processes. To improve the computational speed, the protein contribution to the electrostatic screening is pre-calculated and stored on a grid. Refinement of the ligand position is required to optimize the non-bonded interactions between ligand and receptor. Our version of the GB/SA algorithm takes approximately 10 seconds per orientation on a Silicon Graphics R10000 workstation. In two test systems, dihydrofolate reductase and trypsin, we obtain much better results than the current DOCK force field scoring method. We also suggest a methodology to identify an appropriate parameter regime to balance the specificity and the generality of the equations.